European Commission takes action against irregularities at Eurostat, July 2003

After weeks of media speculation and amid mounting pressure from the European Parliament, the European Commission announced on 9 July 2003 that it would be taking action on financial management at Eurostat after its own internal investigations confirmed that there was 'serious wrongdoing on a much more widespread scale than previously thought'.

The scandal surrounding Eurostat, the body responsible for providing the EU with harmonised statistical information service, has been bubbling away for years but the most recent allegations surfaced in May 2003 when the two most senior Eurostat officials were named as suspects in a case brought by French prosecutors, concerning the alleged siphoning off up to €900,000 into a secret Luxembourg bank account. The money had reportedly come from a French-based economics and statistics consultancy called Planistat, which is one of the many private companies servicing Eurostat's needs. as a result of the allegations OLAF, the EU's anti-fraud office also launched an investigation into Yves Franchet, the former Director-General of Eurostat, and Daniel Byk, a former departmental director, who both stepped down but denied any wrongdoing.

Yet the report from the European Commission on its own Eurostat enquiries suggests that the Planistat case may just be the tip of the iceberg. The report suggests that it was a relatively extensive practice at Eurostat to set up irregular reserves through a number of contracts held with various specific contractors, even though Eurostat senior officials had called for this practice be stopped in 1999, and to artificially increase the value of these contracts in order to spend money elsewhere. The European Commission's volleyball team, missions of officials and lunch receptions are all believed to have received additional funding in this way.

As a result of the two highly critical reports from DG Budget and the Commission's Internal Audit Service, the European Commission has agreed on a number of measures designed to address the most pressing problems. These are as follows

• Disciplinary proceedings have been opened against three European Commission officials

• A number of Eurostat managers have been moved to advisory functions

• All Eurostat's local and central archives were secured on 8 July 2003

• All contracts with Planistat have been suspended

• Mr Michel Vanden Abeele has been appointed as the new Director-General of Eurostat

• A multidisciplinary Commission Task Force will be set up to accelerate the external and internal sides of the enquiries currently managed by OLAF alone

Although these measures are likely to be welcomed by the European Parliament, the European Commission's failure to act sooner is expected to fuel criticisms about fraud levels at the Brussels executive. The European Parliament's budgetary control committee has already suggested that an inquiry into why the European Commission did not act on warnings of wrongdoing issued by its internal auditors in 1999 and 2000s should be conducted. Romano Prodi, President of the European Commission, and Neil Kinnock, the Commissioner responsible for reform, have striven to introduce a number of reforms to the internal workings of the institution in an effort to clean up its reputation following the downfall of the Santer Commission in 1999. But following this latest scandal, the President of the European Parliament, Pat Cox, has spoken of a sense of deja vu and said that he was 'deeply disappointed' that four years after the resignation of the previous Commission, scandal once again surrounded the European Commission. The key question that remains to be answered is the extent to which the Commissioners were aware of the Eurostat scandal ahead of these investigations.

Links:
European Commission:
	09.07.03:	Press Release: The Commission takes action on financial mismanagement in Eurostat
Eurostat:
	Homepage
European Sources Online: Financial Times:
	10.07.03:	Prodi criticised for tardy Eurostat action
	10.07.03:	Brussels finally moves to quell critics over financial scandals at Eurostat
	17.06.03:	Eurostat scandal draws in Prodi and Kinnock
	17.05.03:	EU considers action against Eurostat fraud suspects
	16.05.03:	Probe into 'looting' at heart of Eurostat
BBC News Online:
	09.07.03:	Eurostat heads faces disciplinary probe

Helen Bower

Compiled: Thursday, 10 July 2003

Background and reporting on the week's main stories in the European Union and the wider Europe.